City council corruption does not give rise to Constitutional claims in rezoning denial

by Kaitlin Heinen

EJS Properties, LLC v. City of Toledo; Robert McCloskey
(Federal 6th Circuit Court of Appeals, September 5, 2012)

In April of 2002, EJS Properties entered into a conditional agreement with Pilkington Corporation to purchase 20 acres of a 43-acre lot that Pilkington owned, which included a technical center that EJS intended to convert into a charter school. This agreement was expressly contingent on obtaining a zoning change from industrial to one that could contain a school. EJS also entered into a non-conditional lease agreement with Lake Erie Academy to open the charter school. In May 2002, EJS filed a re-zoning petition with the Toledo-Lucas County Plan Commission. The Plan Commission recommended the re-zoning and passed the request onto the Toledo City Council. The City Council’s Zoning and Planning Commission held a public hearing on July 17, 2002, where everyone agreed to re-zone only the portion of Pilkington’s lot that would be needed for the school. The Committee voted unanimously to recommend the request for full vote by the Council, which was placed on the City Council’s agenda for August 13, 2002. During this re-zoning process, EJS had obtained an early-start building permit to begin $200,000 worth of repairs and improvements on the technical center.

Prior to August 13, Pilkington executives John Keil and Randy Berg had a lunch meeting with City Council member Robert McCloskey, who represented the district containing the Pilkington lot. McCloskey asked Pilkington to donate $100,000 to assist local retirees at the community center—Keil and Berg declined. At the next council meeting, member Peter Gerken moved to table consideration of the re-zoning for two weeks. EJS claims that McCloskey lobbied the other members to reverse their vote, but when he could not get enough to defeat the measure, he asked Gerken to table the matter. (McCloskey was a former Pilkington union negotiator, who had helped negotiate a labor agreement that capped healthcare benefits for retirees, for which he faced significant criticism upon being elected to City Council.) McCloskey then proceeded to call Keil, Berg, and Erich Speckin, the owner of EJS, and left questionable voicemails that sought the money for the retirement center in connection with the pending re-zoning. On August 22, Keil sent a letter to all of the City Council members and Mayor, seeking support for the re-zoning request and to consider the unrelated issues between Pilkington and McCloskey: “Such issues have the potential for exploitation to the detriment of the zoning request.” Pilkington and EJS never reported McCloskey’s request to the police.

On August 27, 2002, the City Council voted 7-4 against re-zoning (4 members had changed their vote from committee, including McCloskey). Only one member testified that he had been approached by McCloskey, who discouraged voting for the ordinance. EJS did not appeal the denial. Two months later, Toledo voters passed a levy, mandating the building of two new middle schools on the east side of Toledo. Toledo Public Schools (TPS) won an eminent domain lawsuit against Pilkington in November 2003 for the entire 43-acre lot. The Plan Commission, the City Council’s Zoning and Planning Committee, and the City Council approved a re-zoning in January 2004 to build a TPS middle school there.

EJS filed a complaint against the City and McCloskey in May 2004 for deprivation of substantive and procedural due process, deprivation of equal protection, deprivation of its property rights and its First Amendment right to petition in violation of 42 U.S.C.A. §1983, and wrongful interference with a business expectation in violation of state law. The district court granted summary judgment to the City and McCloskey on EJS’ constitutional claims. The court denied McCloskey summary judgment on EJS’ tortious interference claim (the district court actually stayed legal proceedings at one point to see the outcome of McCloskey’s 2006 indictment on federal criminal corruption charges, for which he pleaded guilty and received a 27-month prison sentence). After first dismissing EJS’ appeal for jurisdictional reasons, EJS dropped the state-law claim for wrongful interference. Then the U.S. 6th Circuit Court was able to hear the case.

In arguing for the deprivation of substantive and procedural due process, EJS argues that it had property interests at stake in the ordinance for re-zoning, in its contracts, and in its early-start building permit. The City Council never approved the re-zoning ordinance; rather, the City’s Planning Commission and Committee did. The 6th Circuit found that the only way for EJS to have a property interest in the re-zoning ordinance then is if the City Council lacked the discretion to approve it. However, the Toledo Municipal Code’s use of the word ‘may,’ grants the City Council discretionary authority over zoning regulation. Therefore EJS had no property interest in the re-zoning ordinance. Absent a property interest, EJS had no recognizable rights subject to due process protections.  As for its contracts, EJS argues that the contract options created property interests subject to due process protections; however, the purchase agreement explicitly states that “prior to the Closing Date, [EJS] has no title or estate in the Property…and will not claim any such interest…over any part of the Property.” The contract was explicitly contingent upon obtaining a re-zoning for the property, which did not happen–therefore, EJS possesses no interest in the property as a result of its contract. Finally, in regards to the early-start building permit, the permit did not entitle EJS to a re-zoning change, and the improvement work done on the building was “performed at the applicant’s own risk,” according to Toledo Municipal Code.

EJS also argued that it possessed two liberty interests that were violated: 1) a liberty interest in a government decision free from corruption and 2) a liberty interest in engaging in business contracts without unlawful interference. As to the first claim, corruption only affects procedural due process, which EJS could not be deprived of since the court ruled that EJS never possessed a  property interest of any kind. The court rejected the second claim on the same grounds as its ruling on property interests in relation to EJS’ contracts, holding that the defendants did not interfere with EJS’ right to contract because the contracts were contingent on discretionary zoning.  Additionally, the Supreme Court of the United States has upheld only a short list of liberty interests, and the circuit court here could not find any support for a liberty interest in a discretionary government decision free from corruption or unlawful interference.

In addition, EJS argued that corrupt zoning decisions “shock the conscience” and violate substantive due process as a result, regardless of whether or not a property or liberty interest is at stake. However, the court dismissed this claim, stating, “Our prior precedent makes clear that in the context of a discretionary zoning decision, government action will not shock the conscience unless the arbitrary and capricious action touches on a protectable interest.” With neither a property nor a liberty interest at stake, EJS had no merits for this claim. Even if EJS had a property or liberty interest, the court reasoned that “although we can condemn McCloskey for his misconduct, we simply cannot say that his behavior is so shocking as to shake the foundations of this country,” which was the original purpose for establishing the “shocks the conscience” standard.

Finally, EJS’ last two claims involved its right to petition and its right to equal protection. The court conceded that seeking redress from a government official qualifies as petitioning, for which a zoning request also qualifies. Specifically in regards to its right to petition, EJS argued that its right to meaningful access was violated. The court countered that EJS was equating meaningful access with meaningful process. Process is associated with violations of substantive or procedural due process, which was already decided to not have occurred in this case because EJS lacked both a property and a liberty interest. As for equal protection, the court ruled that EJS and TPS were not similarly situated, which does not grant adequate merits for an equal protection claim. Unlike EJS, TPS owned the relevant property at the time of their re-zoning request. TPS also intended to use the entirety of the property rather than part of it. And TPS planned to build a financially stable public school rather than a private school. These are rational bases for the City Council to have treated EJS differently than TPS.

Having dismissed all of EJS’ constitutional claims, the U.S. 6th Circuit Court upheld the district court’s decision to grant summary judgment to the defendants.

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